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Another Netflix price hike? Why one analyst says streaming giant is 'substantially underpriced'

·Producer
·3-min read
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Netflix (NFLX) has faced both positives and negatives in Q3 — from beating subscriber growth estimates to battling backlash over the release Dave Chappelle's comedy special "The Closer."

But at least one analyst seems to think the streaming behemoth is leaving money on the table, with its content slate drawing massive buzz in the face of fierce criticism. On Thursday, the stock spiked to a new record high at $654, with some on Wall Street expecting a test of levels at or near $700.

"Netflix is substantially underpriced versus its value to consumers today," LightShed Partners' Rich Greenfield told Yahoo Finance Live during a recent interview. 

He explained that the average subscription cost — $13.99 for a basic plan (which Netflix upped from $12.99 in February 2021)— is relatively in line with the cost of a movie ticket (a full-price AMC ticket averages $10.50 nationwide.)

"That's just one ticket for one movie," he said. 

"When you think about the fact that the average household is watching well over two hours of Netflix a day — enjoyed by the whole family — with a slate of movies combined with TV series from all over the world, there is a huge amount of opportunity on the pricing side that goes far above the subscriber growth," Greenfield added. 

Still, some analysts are not as bullish on the idea of price increases just yet. 

Jon Christian, founding partner at OnPrem — a global technology firm that works with major entertainment networks to drive content performance — told Yahoo Finance that a more cautious approach to subscription pricing is wise, given the competitive landscape. 

He suggested that Netflix should look at other streaming giants to understand price points relative to content. He suggested that a big question will be "is the amount of content substantial enough to justify a price raise?" 

Santosh Rao, Manhattan Venture Partners head of research, agreed, explaining, "there is a cap now because there is competition."

"We'll see how much it will stick and how elastic it is...but there is a limit to how much [Netflix] can raise," he continued.

Yet Greenfield said that despite the various launches of new streaming platforms — including Paramount+ (VIAC), Peacock (CMCSA) and HBO Max (T) — in addition to the run-up in subscriber figures from Disney+ (DIS) and Hulu, Netflix continues to outperform. 

The analyst cited new data from LightShed Partners that shows nearly half (47%) of all time spent on connected TVs in June 2021 was between Netflix and YouTube (GOOGL). Whereas services like Hulu and Disney+ saw little change from June 2020, despite the surge in subscriber growth. 

"The competition is not hurting Netflix meaningfully," Greenfield said, suggesting that the "second tier" platforms like Peacock and HBO were "eating into" Disney+ and Hulu. "They're not really eating into Netflix and I think that's just a function of the amount of content," he added. 

Meanwhile, Netflix will welcome even more big-name titles and series in the fourth quarter. 

New seasons of some of the platform's most popular shows set for release in the current quarter include "The Witcher," "Tiger King," and "Cobra Kai," — in addition to new movies like "Red Notice" and "Don't Look Up." 

Alexandra is a Producer & Entertainment Correspondent at Yahoo Finance. Follow her on Twitter @alliecanal8193

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